Canola chart turns neutral to bearish

ICE July 2017 canola, with the 20- and 200-day moving averages in blue and orange respectively. (Barchart.com)

CNS Canada –– The ICE Futures Canada July canola contract has run into resistance from a chart standpoint and nearby technical signals look neutral to bearish.

The contract fell from two-month highs the past two sessions, settling right at the 20-day moving average Thursday around $518 per tonne. Prior to Wednesday’s selloff the contract was nearing oversold territory on the relative strength index (RSI), but is now back in the neutral area.

The moving average convergence-divergence (MACD) has also moved from pointing higher to pointing lower over the past week, which can indicate a shift in the underlying market sentiment.

Fund traders had been holding a net long position in canola of about 10,000 to 15,000 contracts to start the week, but liquidated some positions and booked profits on Wednesday and Thursday.

However, analysts say it would likely take a drop below the 200-day moving average, at about $509, to trigger enough of a selloff to see the funds switch to the short side.

As far as resistance goes, the July contract sees a nearby upside target at about $530 per tonne, the two-month high hit on May 5.

— Phil Franz-Warkentinwrites for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting. Follow him at @PhilFW on Twitter.